Thank You

Error.

Thinking about buying shares of Twitter when it starts trading Thursday morning on the New York Stock Exchange?

Well go ahead, but don't expect to be getting much of a value. That's certainly the conclusion of several different financial Websites.

In its original initial-public-offering filing with the Securities and Exchange Commission, Twitter projected to the world that its early investors weren't being overly greedy or at least were playing things cautiously; the range of the deal's offering price would be $17 to $20 a share. (Indeed, based on this price range, Barron's magazine over the weekend ran a modestly positive piece on the IPO's value to shareholders, arguing that the stock was worth buying at up to $30 a share.)

But this past Monday, the company raised its IPO offering price to a range of $23 to $25, signaling that a modest pricing stance was giving way to bullishness. The stock's ticker will be TWTR.

In fact, Bloomberg, in its own valuation analysis of Twitter, argues that the stock at the upper end of its new offering price – assuming an investor even has a chance of getting it that cheap – would be more expensive on a price-to-sales basis than even
FacebookFB 0.6475485661424607%Facebook Inc. Cl AU.S.: NasdaqUSD119.68
0.770.6475485661424607%
/Date(1481320800113-0600)/
Volume (Delayed 15m)
:
17316506AFTER HOURSUSD119.7
0.020.016711229946524065%
Volume (Delayed 15m)
:
148230
P/E Ratio
46.20849420849421Market Cap
343272365515.716
Dividend Yield
N/ARev. per Employee
1943900More quote details and news »FBinYour ValueYour ChangeShort position
(ticker: FB) is now. (Since Twitter, unlike Facebook, doesn't generate any profits, analysts have been using price-to-sales as a comparable metric.)

Bloomberg

"That would value [Twitter] at 11.8 times its estimated 2014 sales, higher than the 11.4 times price-to-sales ratio for Facebook," writes Bloomberg.

But what is the likelihood that any retail investor will be able to purchase shares for close to the new, higher offering range? As Bloomberg points out, Twitter is "already several times oversubscribed at $25 a share and is set for a final offering price above that, people familiar with the situation said."

That's often the way these highly publicized IPOs play out. According to a recent Forbes article, a stock opens for trading at a price 49% higher than the offering price. "Only 9% more upside occurs on the first day of trading," Forbes wrote. "This means investors who get allocated stock on the IPO earn 71% of their return on that first trade. Investors who buy after the stock starts trading miss out on the bulk of the highly publicized returns."

If Twitter ends up opening for trading at more than $30 a share, and that's certainly possible, the excitement for this IPO among prospective investors will quickly fade. What we'll have is just another fully valued stock, like most of the others on the NYSE.

Indeed, according to Insider Monkey, a financial Website devoted to analyzing filings by corporate insiders, Twitter isn't the kind of company that America's most famous investor, Warren Buffett, would buy.